Sterling hits six week low against euro

Published: 14 March, 2011

Sterling hit a six week low against the euro and a three week low against the US dollar on Friday as markets began to push back expectations over interest rate hikes in the UK.

Currency rates

EURO/GBP - 1.1516

US$/GBP - 1.6035
CHF/GBP - 1.4918
CAN$/GBP - 1.5589
AUS$/GBP - 1.5906
ZAR/GBP - 11.037
JPY/GBP - 131.62
HKD/GBP - 12.495
NZD/GBP - 2.1704

SEK/GBP - 10.189
US$/EURO - 1.3919

In addition, the catastrophic earthquake and tsunami in Japan saw investors cut their exposure to perceived high risk currencies which put pressure on the pound. Out this week, there is claimant count figures released on Wednesday and Bank of England governor Mervyn King makes a speech, which could further impact market expectations over interest rates.

In the euro zone, the euro strengthened against the pound and US dollar on Friday as European leaders agreed a deal over higher retirement ages, labour market flexibility and debt and deficit limits for European countries. An agreement on Saturday night to strengthen the bailout fund is one step in the right direction, but there is still a need for peripheral countries to shore up their finances. This week sees German economic sentiment, so ensure you protect yourself by talking to one of the team sooner rather than later.

In the USA, the major event of the week is the US Federal Reserve's interest rate meeting on Tuesday. With an economic recovery that is running far from its potential and surging oil prices, the Fed is not expected to change much. There is potential for a large sell off of US bonds that are currently yielding very little.

Elsewhere, the Japanese yen saw a surge in demand following the country's earthquake as investors cut positions that had been funded by cheap Japanese yen. The move saw large demand for yen and also speculation over potential insurance pay outs, and the currency surged. Whilst a strong currency is traditionally positive, the Japanese economy relies on exports and this is not likely to encourage export.

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